Got this in a superday last week and am still not sure of the answer. Does anyone know the correct answer?
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It makes them glossier and more detailed.
Increase in Stockholder's equity through the sale of shares at par and paid in capital. This is balanced out via an increase in cash on the assets side of the balance sheet.
I believe that is the majority of the impact of an IPO. You can also factor in for other things such as underwriting and legal fees.
So no effect on the Cash Flow or Income Stmt?
"This is balanced out via an increase in cash on the assets side of the balance sheet."
Think it through SBE. An IPO involves selling shares to raise cash. The cash flow statement must show this large inflow. The balance sheet effects discussed above are correct, although it's unlikely that a company would keep this massive balance in cash for any significant period of time. Companies generally use the large inflow of cash from an IPO to pay off some debt and buy assets to expand their business. As for the income statement, the effects are less direct. But if you wanted to be fancy, you could say overhead expenses would increase because you'd have to hire additional accounting professionals to administer your public company requirements, or that interest expenses have decreased since you paid down some debt with IPO proceeds, or depreciation expense increased because you bought some some equipment etc.
it would run through Stock issuance on the CF statement increase stockholders equity increase cash (but as ehf said would likely be used immediately to pay down debt, revolver, etc)
IPOs, rights offerings, bond issues & other capital raising activities show up under Cash Flow from Financing Activities. Buybacks, and various bond redemptions are all -ve on this line. See
http://www.investopedia.com/terms/c/cashflowfromfinancing.asp
I got this in a recent first round for a summer SA position...
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